Red-hot security software company FireEye sells more than $1 billion in fresh shares

By Jeremy C. Owens jowens@mercurynews.com

Posted:
03/07/2014 11:53:40 AM PST

Updated:
03/07/2014 02:33:01 PM PST

MILPITAS -- Less than six months after an eye-popping initial public offering, security software company FireEye sold millions of new shares for more than four times the price of its IPO, bringing the company and its stakeholders more than $1 billion.

"We have an opportunity in front of us, and as long as you keep reading the headlines of companies being compromised, our mission is not accomplished," Chief Operating Officer Kevin Mandia said Friday.

FireEye announced Thursday evening that it was pricing 14 million shares at $82 apiece in a secondary offering that will put $457.7 million in the Milpitas company's coffers and ship $690.3 million to early investors and stakeholders such as CEO David DeWalt and venture investors. The company sold its first batch of shares in September 2013 for $20 apiece, taking in $303.5 million, but the stock price nearly doubled in its market debut and has steadily risen since, moving as high as $97.35 this week.

The $1 billion acquisition of Mandia's security startup, Mandiant, has been one of the big drivers for Wall Street's FireEye enthusiasm, as it paired Mandiant's ability to respond to data breaches with FireEye's groundbreaking threat-detection technology.

"The Mandiant acquisition was a game changer because it really morphed FireEye into a pure end-to-end, next-generation security method," FBR Capital Markets analyst Daniel Ives said Friday, calling it "a one plus one equals three equation."

Ives increased his price target on the stock from $90 to $105 after the secondary offering was originally announced this week, and explained in a Friday phone interview that the company is one of the most desirable stocks in the hot cybersecurity market because its technology trumps rivals.

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"Their detection capabilities are as advanced as any out there in determining and quantifying threats to networks," Ives said.

Network breaches have been a hot topic in the media of late, with retail giant Target discovering a data breach during the holiday-shopping season that left information on up to 110 million customers exposed to hackers and California Attorney General Kamala Harris announcing this week that 300 California businesses and government agencies had been attacked in the past two years, exposing 20 million customer accounts.

"There's nothing, in my opinion all that unique about the Target breach," Mandia said, adding, "There's not just one company breached right now, there's hundreds if not thousands."

With the capital raised in its secondary offering, Mandia said FireEye will look to expand its security offering to more small and medium-size businesses, which Mandia said "are sitting ducks for these targeted attacks," and will also continue to morph their platform to fit the needs of a changing Web.

"We've got to go where the bad guys go," he explained. "If the cloud is where everybody starts putting their data, we're going to have to have a way to safeguard that. If the bad guys are going to mobile, we already have a platform to safeguard that."

"We have to continue to grow this company as we set out to secure cyberspace," Mandia added.

Ives predicts that FireEye will continue to look at acquisitions, just as it used almost half of the cash obtained in its IPO to purchase Mandiant, in a deal that also involved stock.

"Over the next 12 to 18 months, I could see them making larger acquisitions," Ives said. "I think they're going to be very strategic about who they acquire. DeWalt is as good as any CEO out there in terms of identifying the right deals at the right time."

DeWalt was one of several stakeholders selling stock in the offering, divesting nearly 500,000 shares from his holdings of more than 5 million. Among the other selling stockholders were founder and Chief Technology Officer Ashar Aziz, who sold more than 1 million of his total of more than 10 million shares; and Palo Alto venture-capital firm Norwest Venture Partners, which sold about 10 percent of its 20.8 million share stake.